The use of commercial drones, technically called unmanned air vehicles, has been hailed by insurance companies as an economical and safe way to do costly inspections for claims and risk evaluations.

And Hartford property and casualty insurers are on the frontlines testing the nascent technology that is beginning to have appeal to a broad range of industries from retail to real estate.

The Hartford Steam Boiler was the latest Hartford insurer to get approval from the Federal Aviation Administration (FAA) to fly drones that help customers identify exposures, manage risks and prevent loss. Travelers and The Hartford are also using drone technology.

Burgeoning Global Market

According to a new study by PriceWaterhouseCooper on the commercial applications of drones, the emerging global market for business services using unmanned aircraft is valued at over $127 billion. The impact on insurance is expected to be $6.8 billion.

The commercial use of drones started in Japan in the 1980s, when unmanned helicopter flights were used to support manned helicopter flights for spraying pesticides, the PWC report said.

Patrick Gee, senior vice president of property and automobile claims at Travelers Cos., said drones made sense for the insurer from both an underwriting perspective, helping to determine property values and conditions before issuing policies, as well as for claim and risk control after an incident has occurred. Drones can go into situations more safely, like a chemical spill or burned-out home, than claims staff can. Like other insurers interviewed for this story, his company had to achieve FAA certification.

He said drones are an investment worth making. For smaller properties like private homes where drones don't have to fly high or for more than 30 minutes, quality commercial drones can range in price from $750 to $1,000. Drones used to cover a larger area, such as reviewing widespread damage from a natural disaster, could cost between $5,000 to $10,000 because of their extended flying time and more sophisticated equipment.

Matt Scott, head of claim operations at The Hartford, said his company adopted the use of drones to reduce the risk to employees. "Getting a bird's-eye view of damage using a drone can be a much safer way to assess damage than having a front-line insurance adjuster assess the damage from the ground, for example," he said.

Drone Costs

The biggest investment for The Hartford, Scott said, was the commitment to using the new technology and working through the FAA approval and pilot licensing processes. "The overall investment is well worth it when you see how the drone can gather the information we need quickly to help our customers prevail following a loss," he said.

Currently, FAA rules require a commercial drone operator be accompanied by a spotter when flying outdoors. Also, anyone within 500 feet of a drone flight must be notified, doubling the manpower costs in a suburb, for example. That notification includes pedestrians and motorists who might be within the coverage zone.

Another manpower cost is the requirement that commercial drone operators have a pilot's license. That hasn't been a hindrance for Travelers and other insurance companies because they already have pilots on staff.

Things are about to get less expensive, too, as new FAA rules are put in place easing strict regulations on who could fly drones, as well as the manpower needed to operate them. The proposed changes include allowing solo operators to man the drone and dropping the pilot license requirement. Gee said his certified drone pilots have been busy training claims personnel in expectation the requirement will cease.

An FAA spokesperson said the agency should finalize new rules on commercial drone use by mid-June.

Training ground

To familiarize its staff with drone technology, Travelers has established a ground school at its Windsor Claims University. Students have to study things like weather, aeromedical factors and drone flight operations. Then they start with smaller drones and flight simulators. After that training they move up to the larger drones and practice property inspections. Training can take several weeks by completion.

Jay Jablonski, vice president of loss control at Hartford Steam Boiler, said drones could have inside applications as well, and FAA oversight is not applicable. He cited, not surprisingly, boiler inspections. Before, the company would have to erect scaffolding. Now, a drone with a high-definition camera can inspect a four-story tall boiler within hours. "We can use it as a screening tool," he said.

He, too, sees a widespread use of drones by claims personnel, but without the need for extensive training on smaller models under 2 kilograms (less than 5 pounds), which he said would be exempt most likely under the new FAA regulations. "The technology has really changed over the last couple years. They are relatively easy to fly. I could teach you the basics in a minute, and then you have to practice."

One issue the industry faces going forward is a lack of universal regulations as different communities and states adopt their own drone requirements. Jablonski said, "There's a bit of a battle over who is supposed to be regulating their usage. That's kind of up in the air."

When they go to a new location, drone operators have to check state and local restrictions. Some places will say they need certain liability coverage if a drone strikes someone or property, and some might restrict them from flying, he explained.